But now I think it’s time to focus on HPM (hype-per-million): misleadingly high press popularity that masks underlying revenue model problems. Electric cars seem to be heavy on the hype — by the vendors, the business press, the general press and even politicians — while sales are barely improved from the first great coming of the EV. (And this time, there’s no one to blame for poor sales but the invisible hand of basic economics.)
An AP report Friday was stark in its assessment:
GM sold 250 to 350 Chevy Volts this month, and Nissan's sales totaled fewer than 10 Leaf sedans in the past two weeks. Production for both is slowly ramping up.According to the story, Nissan can build 50,000 Leafs a year while Chevy hopes to sell 10,000 Volts in 2011 and up to 45,000 in 2012.
It will be well into 2012 before both the Volt and Leaf are available nationwide. And if you're interested in buying one, you'll need to get behind the 50,000 people already on waiting lists.
It's still unclear just how large the market for electric cars will be once those early adopters are supplied. The base sticker price is $40,280 for the Volt and $32,780 for the Leaf, much higher than most similar-size, gas-powered cars. If those prices rise, it could make them even more of a niche product than predicted. Buyers also are worried that advertised lease deals may not last, and a federal tax rebate of $7,500 could disappear if Congress decides battery-powered cars are no longer a priority.
By comparison, Chevy sells more than 200,000 Malibu sedans a year (for a price that’s half that of the Volt.) Of course, price is everything — now more than ever. And with the new Congress, expansion or even extension of generous Federal subsidies seem less likely than ever.
Edmunds is predicting HEV/PHEV/EV will rise from 2.4% in 2009 to 4.8% in 2013, with EVs only a small fraction. Of the 14-17 million passenger vehicles sold every year in the US, that would be an increase from about 350,000 to 700,000 vehicles a year. Most of those are probably the Prius, which is selling about 400,000 units annually (worldwide).
This is consistent with the November prediction made by Daimler AG CEO:
In 10 years’ time, the overall market share of electric cars is likely to be still in the single-digit percentage range. … In principle it’s similar to President Obama—first, expectations are being raised externally and then people are surprised they don't get fulfilled. From today's perspective it's already clear [that] we won't earn high returns with electric cars in the years to come. And that's the optimistic wording.Even the 4.8% forecast may be optimistic: selling 70,000 Leafs and Volts would be only 10% of the US market. Given Toyota is driving most of its HEV demand to the Prius, category growth is going to depend on other makers (most likely Honda and Ford) offering their own hit HEV/PHEV/EV models.
Both Honda and Ford have offered credible products, but neither has made much of a dent: even in a good month (October 2010), Honda only sold about 4,000 units in the US. Honda promised to be aggressive in pricing its HEVs and EV models, but the Fit EV (due in 2012) is priced at $30k, only about 10% below the slow-moving Leaf.
So where is the growth going to come from? Yes, $150/barrel oil would increase EV sales (even if it has no direct effect on renewable energy, which instead competes with coal and natural gas.) But that’s not really a business strategy — unless you have the geopolitical connections to arrange a third Arab Oil Embargo.
My own purchase intentions reflect this reality. At one point, I thought my next car would be the $20k Honda Fit Hybrid, until Honda decided not to sell it in the US. Instead, it’s more likely to be $15k for a Ford Fiesta (37mpg), Mazda2 (35mpg) or Honda Fit (33mpg). Ignoring the time value of money, a $15k purchase price differential (vs. a Leaf or Fit EV) buys 5,000 gallons of gas — enough to cover the fuel costs for the entire life of the car. Plus there’s no battery to put in the landfill, or coal-generated electricity to pollute the planet.